Getting a loan approved can be compared to fitting pieces into a puzzle. You know you have all of the pieces, but you are just not sure where they go. While there are a reduced number of programs and options currently available, the reality is that there are still loans being approved every day. Regardless if you work with a broker or a local lender, it is up to you to figure out how you can make your loan work. Sometimes this can be as easy as paying off a small credit card or as difficult as putting additional money down. Just like getting your offer approved may take some creative thinking, you need to be ready for anything.
The lending profession took a severe hit with the mortgage collapse. Almost 40% of all mortgage brokers are out of the business. Those that remain face strict licensing and educational guidelines. Everyone that is still on the lending side is committed to their profession and should have a good idea of what programs are out there. The first step in getting your loan approved is deciding who to work with. Many buyers will use whoever their realtor recommends without giving anyone else a chance. In some cases, this can work out. However, this is your loan and you should shop around. This doesn’t mean you should have everyone you talk to pull your credit, but you should inquire what kinds of loan programs they have available for investors. Any good lender or broker will have a general idea of what they can do and what the guidelines are. Saving 5% off of a down payment or having different program options can be as easy as making just a few phone calls.
As a general rule of thumb, the more complex the program, the less likely a local lender will be able to help you. If you are putting down a large chunk of money and have excellent credit, you will have options regardless of where you go. If you are on the fence with your credit, debt-to-income ratio and down payment, you may need to work with a mortgage broker. A broker will have access to numerous different banks and may be able to find one that is the best fit for you. Changes in mortgage regulations limit the amount of fees and points anyone can charge. Subsequently, you will know where you stand and what you are paying no matter who you work with.
Once you have chosen someone to work with and the loan has been submitted, you need to be ready to act. You then need to ask for a copy of the loan approval so you can have an idea of where you stand. You have every right to ask for a copy of the approval, as to see exactly what is needed and any underwriter’s comments. It is your responsibility to get any outstanding items back to your lender as quickly and accurately as possible. Most lenders will only review any outstanding items when they have all of them at once. If you know you need one additional document or signature, it is better to wait to send the right one or send all at once. The easier you can make it for the lender, the greater chance you will get approved.
Once you find out why you got rejected, you need to determine if you have any other options. If your debt-to-income ratio is just over the guidelines, you can look to pay an account off. If your credit score is too low, you can see what accounts you can consolidate or eliminate to get your score higher in 30 days. Here is where you need to work with someone that will give you all of your options and tell you what you need to do. There will always be a reason why you were rejected. The sooner you can correct it, the better chance you have at saving the existing deal or not running into this issue again with the next offer you make.
The longer your loan is in underwriting or the slower you send any outstanding conditions over, the more room you have for problems to appear. If you only send one page of a bank statement, your file may not be looked at again for several days. During this time, there could be an issue with the seller, attorney or another part of the loan that can cause an issue. Just like when you are putting a deal together, closing a mortgage often requires you to be a problem solver. Very few deals will go smoothly, even with excellent credit and a good down payment. Between appraisal, title, insurance and last minute underwriting problems, there is always something that can throw a wrench in the system. Your broker may be the one working with the bank, but it is still your loan and up to you to think creatively.
Closing a loan may be more difficult, but it is not impossible. As a buyer, you need to do your part to ensure that the deal is always moving forward. Be prepared to do whatever needs to be done.
